How will changes in supermarkets impact food manufacturers?

29th March 2018

Unless you're a food manufacturer that sells direct-to-consumer, the health of your business may well be heavily tied to the fortunes of the retailers that sell your food. The first quarter of the year has delivered a fair amount of news on this topic, signalling changes that will affect Australian food manufacturers.

Aussie Farmers Direct goes into administration

First was the news that direct-to-door grocery subscription service offered by Aussie Farmers Direct (AFD) would be ending, as the company was going into administration.

AFD said in a statement that they can no longer compete with the two major supermarkets and the mass of cheap imported produce. Some former franchisees, however, dispute this explanation, telling news.com.au that ill-considered expansion plans into non-perishables, among other things, contributing more to the company's downfall.

The closure of Aussie Farmers Direct is bad news for local food manufacturers.

Whatever the root cause, it's bad news for local food manufacturers. The loss of a sales channel - unless it's quickly replaced with a superior one - can only ever be a bad thing.

Coles announces shift away from price-based marketing

Not all the news, however, has been negative. Coles recently announced that they would be changing the metrics on which they attempt to compete with other large supermarket chains in Australia. Price will no longer be what they focus on in their marketing efforts, instead shifting to highlight sustainability, local produce and community.

One of the first shots fired in the price wars was the announcement from Coles in 2011 that they'd be lowering the price of their own-brand milk to A$1. Woolworths responded in kind, and since that time price has been the defining factor around which the two giants battled. Yet the potential end of the price wars is fantastic news for smaller food producers in Australia. If forced to compete directly on price, many of the smaller manufacturers in Australia would simply be unable to survive.

Local manufacturers should take a leaf from Coles's book and highlight the local element of their products. The latest research from Roy Morgan on the subject shows that 88.1 per cent of Australians are more likely to purchase locally-made food products.

To find out more about how Advanced Business Manager's software offerings can help you better manage your food manufacturing operation, contact us today.